Question

You have been asked to calculate the debt ratio for a firm that has the following components to its financing mix:
• The firm has 1 million shares outstanding, trading at $50 per share.
• The firm has $25 million in straight debt, carrying a market interest rate of 8%.
• The firm has 20,000 convertible bonds outstanding, with a face value of $1,000, a market value of $1,100, and a coupon rate of 5%.
Estimate the debt ratio for this firm.


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  • CreatedApril 15, 2015
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